Research in Motion (NASDAQ:RIMM) finally saw good news flow in the last week, giving its battered stock some much-needed respite. The company CEO, Thorsten Heins, confirmed in a press release last week that the new BlackBerry 10 platform has entered the ‘Lab Entry’ testing phase with more than 50 carriers across the world. [1] This, he claimed, was a critical milestone in RIM’s quest to launch its first BB10 devices in the first quarter of 2013. RIM’s shares have since shot up by more than 15% in the past week as confidence returned that the management might be able to deliver on its deadline this time after having delayed the launch twice already during the past year.

However, the Q1 2013 launch implies that competitors such as Apple (NASDAQ:AAPL) and Samsung (PINK:SSNLF) will continue to munch on RIM’s market share until then and even beyond as RIM tries to generate positive market sentiment around the new devices. To add to RIM’s woes, competition in the smartphone market is only increasing with Microsoft (NASDAQ:MSFT) making a reinvigorated mobile play with its combined Windows 8/Windows Phone 8 push this holiday season. Still we see more value in the stock coming from its huge subscriber base and its unique value propositions in push email and security. Our price estimate of $12 for RIM’s stock is about 35% ahead of the current market price.

The struggling smartphone maker has seen its BlackBerry unit sales fall y-o-y for the last five consecutive quarters. Last quarter saw RIM ship only 7.4 million BlackBerries, a precipitous drop of 30% y-o-y and about 5% q-o-q. Device revenues for the first half of fiscal year 2013 are already down over 50% over the same period last year. However, despite the revenue drop, RIM continues to add new subscribers every quarter, with many coming from international markets.

RIM currently has over 80 million subscribers globally. With BB nowhere near its peaks of customer appeal, RIM will be primarily looking to get this installed base to upgrade to BB10 initially. At the same time, RIM will bank on the push e-mail and BBM service revenues from existing subscribers to tide over this difficult transition period. CEO Thorsten Heins has said the company is looking to leverage the security strength of BlackBerry services that governments and enterprises around the world have come to rely on.

We believe the BlackBerry services, which include push e-mail and BBM, are unique value propositions for RIM’s customers, and the company is doing the right thing by realigning its focus on this segment. Our estimates show that this is RIM’s most valuable division currently, accounting for almost 45% of our price estimate for the stock.

BBM still relevant in many markets

But a carrier push to reduce fees as well as a loss of more enterprise customers to rival platforms, as the bring your own device (BYOD) movement becomes more popular, could hinder RIM’s strategic moves to boost revenues from the services division. In addition, the new BB10 devices will not be supported by the existing enterprise servers (BES), potentially making the BES 10 upgrade process costlier and complicated thereby reducing RIM’s chances of pushing BB10 into the enterprise base. (see BES 10 Fragmentation Increases The Risk For RIM)

However, the emerging markets of Asia Pacific, South Africa, Venezuela and Indonesia, where the BB brand has not yet been hit as badly as in the developed markets, could be RIM’s dark horse. These regions continue to see a good number of new subscribers adopt BlackBerries due to the continuing popularity of the BBM service in these markets. Much still depends on BB10’s reception in the market, and we do not really expect RIM to ever reach the heights it once commanded in the smartphone market. But if RIM does manage to make BB10 a strong smartphone OS, it could still claw its way back into the market and continue to generate cash from its enterprise and retail niche.

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